In re Aman, Case No. 6:08-bk-06203-ABB (Bankr.M.D.Fla. 3/26/2010)
| Decision Date | 26 March 2010 |
| Docket Number | Case No. 6:08-bk-06203-ABB.,Adv. Pro. No. 6:08-ap-00216-ABB. |
| Parties | In re: REGINE O. AMAN, Chapter 7, Debtor. RAY NIELSON and PANDORA NIELSON, Plaintiffs, v. REGINE O. AMAN, Defendant. REGINE O. AMAN, Third-Party Plaintiff, v. EQUITABLE TITLE AGENCY, INC., Third-Party Defendant. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida |
This matter came before the Court on the: (i) Amended Complaint Seeking Exception to Discharge and Imposition of Equitable Lien (Doc. No. 3) filed by the Plaintiffs Ray Nielson and Pandora Nielson (collectively, "Plaintiffs") against the Defendant and Debtor Regine O. Aman ("Aman"); (ii) Aman's Third Party Complaint (Doc. No. 14) filed against Equitable Title Agency, Inc. ("Equitable"); and (iii) Aman's Motion for Summary Judgment (Doc. No. 26) filed against Equitable. Plaintiffs request the mortgage lien encumbering the home they purchased from Aman be deemed nondischargeable on the basis Aman fraudulently failed to disclose the lien at closing and accepted and retained proceeds of sale of $225,127.00 knowing she was not entitled to such proceeds. Aman seeks judgment against the closing agent Equitable for negligently failing to satisfy the lien at the sale closing.
The final evidentiary hearing was held on January 19, 2010 at which Aman, Plaintiffs, and their respective counsel appeared. The parties filed closing briefs pursuant to the Court's request.1 Equitable did not file any response or make any appearance in this proceeding.
The unsatisfied mortgage indebtedness is nondischargeable and judgment is due to be entered in favor of Plaintiffs and against Aman pursuant to 11 U.S.C. Sections 523(a)(2)(A) and 523(a)(2)(B). Aman's Third Party Complaint against Equitable is due to be dismissed because a negligence cause of action is not actionable pursuant to Florida State law. The Court makes the following Findings of Fact and Conclusions of Law after reviewing the pleadings and evidence, hearing live testimony and argument, and being otherwise fully advised in the premises.
Plaintiffs' Motion:
Plaintiffs' Amended Complaint consists of three counts: (i) Count I titled "Nondischargeability of Debt — Section 523(a)(2)"; (ii) Count II titled "Establishment of Equitable Lien"; and (iii) Count III titled "Money Judgment." Plaintiffs did not plead a specific subsection of 523(a)(2). They made an ore tenus motion at trial to amend the Amended Complaint to conform it to the evidence asserting this matter constitutes an 11 U.S.C. Section 523(a)(2)(A) nondischargeability cause of action. Aman agrees this matter constitutes a Section 523(a)(2)(A) cause of action and does not oppose Plaintiffs' motion.2
The evidence presented at trial relates both to a Section 523(a)(2)(A) cause of action and a Section 523(a)(2)(B) cause of action. Plaintiffs, however, did not plead Section 523(a)(2)(B) in their Amended Complaint or raise it in their ore tenus motion. They make reference to Section 523(a)(2)(B) in their closing brief, but have not expressly sought to amend their pleadings to include a Section 523(a)(2)(B) cause of action.
Federal Rule of Civil Procedure 15(b), made applicable to bankruptcy proceedings pursuant to Federal Rule of Bankruptcy Procedure 7015, grants the Court liberal authority to amend the pleadings to conform them to the evidence where an issue is tried by the implied consent of the parties.3 Implied consent does not exist where the defendant will be prejudiced.4 A defendant is prejudiced when she "had no notice of the new issue, if the defendant could have offered additional evidence in defense, or if the defendant in some other way was denied a fair opportunity to defend."5
The parties have presented and tried Section 523(a)(2)(A) and Section 523(a)(2)(B) causes of action, even though these Bankruptcy Code provisions were not specifically pled by Plaintiffs. Aman impliedly consented to the trial of Section 523(a)(2)(A) and Section 523(a)(2)(B) causes of action. The evidence presented is relevant to Section 523(a)(2)(A) and Section 523(a)(2)(B) causes of action. All pertinent evidence has been presented. Aman had a fair opportunity to defend herself.
The pleadings are hereby amended to conform to the evidence presented at trial pursuant to Federal Rule of Civil Procedure 15(b)(2) to include Section 523(a)(2)(A) and Section 523(a)(2)(B) allegations.
Aman's Motion:
Aman, at the close of Plaintiffs' case, made an ore tenus motion to dismiss the Amended Complaint asserting Plaintiffs had failed to establish the nondischargeability elements of Section 523(a)(2)(A). The Court reserved ruling on the motion. Plaintiffs have established the elements of Sections 523(a)(2)(A) and 523(a)(2)(B). Aman's motion to dismiss is hereby denied.
Aman and her husband William H. Aman, Jr. purchased in 1993 a new single-family home located at 1723 Lake Roberts Court, Windermere, Florida 34786 with Parcel Identification Number 01-23-27-1108-01-150 (the "Windermere Property"). They extensively upgraded the property and enjoyed it for many years. Their son was born while they resided there. Aman's husband passed away after a lengthy struggle with a serious illness.
Aman began dating Milburn "Sonny" Harper ("Sonny") in 2003 and he moved into the Windermere Property with Aman. Sonny has exerted considerable influence over Aman during their relationship. He suggested she sell the Windermere Property so they could relocate to Clermont, Florida to be closer to his children. Aman agreed and placed the Windermere Property on the market in June 2004.
Plaintiffs and Aman executed a Residential Sale and Purchase Contract on or about October 11, 2004 ("Sale Contract") pursuant to which Plaintiffs agreed to pay and Aman agreed to accept $663,900.00 for the Windermere Property.6 The Sale Contract is the standard Florida contract created by the Florida Association of Realtors, FAR-6. The closing of the sale was set for November 29, 2004. Aman agreed to convey to Plaintiffs "marketable title to the Property by statutory warranty deed . . ." and a "title insurance commitment issued by a Florida-licensed title insurer in the amount of the purchase price and subject only to title exceptions set forth in this Contract."7
When the parties executed the Sale Contract the Windermere Property was encumbered by a first-priority mortgage held by BankUnited F.S.B. ("BankUnited") in the amount of approximately $332,893.00. No other mortgages encumbered the Windermere Property. There was substantial equity of approximately $331,000.00 in the Windermere Property as of October 11, 2004.
Sonny suggested Aman withdraw a portion of the Windermere Property's equity through a home equity line of credit, ostensibly to be used as a down payment for the purchase of a property in Clermont. Aman agreed and, with Sonny's involvement, pursued a home equity line of credit from First Horizon Loan Corporation ("First Horizon"). First Horizon, based upon an appraisal of the Windermere Property, approved a home equity loan with a "Maximum Principal Amount" of $225,127.00.8
The First Horizon loan closing occurred on November 9, 2004 at which Aman executed various closing documents, including a HUD-1 Settlement Statement, and First Horizon loan documents. She executed in favor of First Horizon a Multistate Home Equity Line of Credit Agreement ("Note") in the principal amount of $225,127.00, with interest accruing at a variable rate, and a Florida Open-End Mortgage on November 9, 2004.9 Loan proceeds of $83,362.95 were disbursed by the closing agent to MBNA and Marriott to pay off Aman's credit card and home improvement debts.10 Aman received the cash proceeds balance of $143,915.55 at closing.11 Aman's equity withdrawal reduced the equity in the Windermere Property by $225,127.00.
The First Horizon Florida Open-End Mortgage was recorded in the Official Record Book of Orange County, Florida on November 16, 2004 at Book 07702, Page 3135.12 First Horizon held a properly perfected second-priority mortgage of record on the Windermere Property as of November 16, 2004. Aman understood the First Horizon loan was secured by the Florida Open-End Mortgage and was in second position to the BankUnited mortgage.
Equitable was selected as the closing agent for the sale of the Windermere Property to Plaintiffs. Aman had telephone communications with Susan J. Gordon ("Gordon"), an Equitable employee, regarding the closing scheduled for November 29, 2004 and informed her of the First Horizon mortgage. Equitable prepared and transmitted to Aman a draft HUD-1 Settlement Statement, which Aman reviewed.
Aman identified two errors in Equitable's draft HUD-1 Settlement Statement:
(i) It included a line item for the payoff of the BankUnited mortgage, but did not include a line item for the payoff of the First Horizon mortgage; and
(ii) It included a line item for a prepayment penalty for the BankUnited mortgage.
Aman sent a letter with attachments to Gordon via facsimile on November 27, 2004 addressing the two errors and stating, in part:
Also, I am including information that you will need for paying off the recent Heloc on my home. I did this in order to have ready cash to move on other property opportunities.13
Aman included with her letter correspondence from First Horizon dated November 9, 2004 regarding the loan number and contact information for the servicer of the loan.14
Equitable received Aman's November 27, 2004 fax as evidenced by Equitable's removal of the BankUnited prepayment penalty from the HUD-1 Settlement Statement presented to the parties at closing and the letter being part of Equitable's closing file that Equitable produced in response to Aman's subpoena duces tecum.15
Aman understood the BankUnited and First Horizon mortgages were encumbrances on the Windermere Property...
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